The prospect of Donald Trump's potential reelection as the President of the United States has led to a rise in U.S. stocks. However, Citigroup strategists caution that a Republican victory could signal a time to exit the market. While Trump's win is often seen as favorable for the stock market due to his corporate tax reduction policies, Citigroup's strategists believe that the six-month rally in the S&P 500 indicates that a market pullback might be imminent.
Scott Chronert, a Citigroup strategist, mentioned in a recent report that given the fundamental uncertainties under a Trump and Republican full victory scenario, reducing positions in any post-election market rallies may be prudent.
The recent highs in U.S. stock benchmark indices are primarily driven by economic performance and corporate earnings. However, increasing bets on Trump's victory have also contributed to the market movement. On the other hand, potential tax hikes from Vice President Harris are viewed as unfavorable for the stock market. Current polls show a tight race between the two candidates.
Chronert believes that the policies of both candidates could eventually be detrimental to stock market fundamentals. He notes that the S&P 500 appears fully valued at current levels and that any sell-offs caused by a Harris victory combined with a divided Congress might present buying opportunities.
